Navy Federal Credit Union is widely recognized as a reputable financial institution, catering to military personnel and their families, whether they’re actively serving or veterans. The prospect of a no-money-down mortgage with no Private Mortgage Insurance (PMI) from Navy Federal initially piqued our interest, my husband and. However, our journey with Navy Federal took an unexpected turn about a month ago.
Our situation is somewhat unique. With my background as a former Realtor® and my husband’s 17-year tenure in the financial services industry, we are well-versed in the intricacies of mortgages and loans. Here’s a bit of context before I delve into why we decided to part ways with Navy Federal and how our new mortgage lender approved us for a significantly higher loan amount (without any increase in income).
In 2020, we worked tirelessly to eliminate a staggering amount of debt. We sold our Illinois home and relocated to Florida, primarily due to the challenging political and social climate in Illinois. We were determined to get our financial house in order, which entailed selling our boat, forgoing our annual summer vacation (since we now reside in Florida), and consolidating our remaining credit card debt into an unsecured loan with LightStream, a division of SunTrust. This decision significantly eased our financial burdens and, for the first time, kept our credit cards unused.
It’s worth noting that while we generally agree with many of Dave Ramsey’s financial principles, we don’t subscribe to all of his advice. We decided to embark on our path to financial freedom in our own way.
Given my self-employment and numerous write-offs, we believed it would be more prudent for me to stay off the mortgage, despite my impeccable 800 credit score. My husband’s credit score was equally stellar, accompanied by a flawless payment history and an astonishingly low debt-to-income ratio of 8%, achieved through debt repayment and responsible financial management.
Our understanding was that these factors would make us strong candidates for a Navy Federal mortgage. It’s essential to note that Navy Federal manually underwrites all its mortgages, and our application came with compelling factors that should have positioned us favorably.
However, a significant issue arose:
Navy Federal Credit Union’s Mortgage Interest Rate Hikes
Initially, Navy Federal Credit Union preapproved us for a Homebuyers’ Choice mortgage, offering no down payment and no PMI, with an amount of $315,000. This was a favorable figure considering the soaring property values in our Northwest Florida market.
The interest rate they quoted was 3.875% for a 30-year fixed term, a decent rate though not the best. Nevertheless, we were content with minimal out-of-pocket expenses for closing costs.
But here’s where our story takes a complicated twist:
My husband was commuting to work, and after Hurricane Sally damaged the Pensacola Bay Bridge, his commute swelled from 35 minutes to a grueling 1.5 hours each way. This situation became untenable due to several dangerous head-on collisions on the only alternate bridge to our island.
In response, my husband received a job offer from his previous employer. While the base pay was lower, it came with a guaranteed bonus structure and the potential for him to earn more than in his current position. So he accepted the offer.
Navigating a Job Change During Home Purchase
Changing jobs in the midst of buying a home can potentially complicate the loan process. We understood the risk but believed the benefits outweighed it. We aimed to find a way to both buy a home and enhance my husband’s quality of life.
Usually, switching jobs within the same field allows you to use bonus income and commissions to bolster your qualification for a larger loan. However, Navy Federal was adamant about not considering the bonus income (despite written confirmation from his new employer).
Previously, I mentioned the issue of rate increases. Due to our inability to use the bonus income and my husband’s slight pay reduction with the new job, our preapproval amount plummeted from $315,000 to $280,000. We weren’t thrilled, as finding a suitable home for our family of five, with both parents working from home, was increasingly challenging.
Then came the shocker:
Interest Rate Surge and Decreased Preapproval
Navy Federal Credit Union raised our interest rate from 3.875% to 4.25% and further reduced our preapproval amount to $270,000. Panic set in. We knew these numbers didn’t add up, particularly regarding my husband’s debt-to-income ratio. So, I inquired with our loan officer about the calculations for taxes and insurance, which were significantly higher than our estimates.
Determining home affordability relies on more than just zip code-based averages. It involves considering each property’s specific property taxes within the market, homestead exemptions, and how they adjust based on a higher sales price than the current assessment.
Now, before I delve into assessing potential property values, here’s the final straw:
Leveraging Tenure and Bonus Income
Given that my husband returned to his previous employer within a year, he was able to regain his previous tenure. He had worked for the insurance company for four years before our move to Florida. Because there was only a one-year difference in tenure, his company recognized his hire date as October 2016 rather than March 2021.
Navy Federal’s primary objection to using his bonus income was that he lacked two years of history with his prior employer. We decided to contest this limitation.
Upon in-depth underwriting review, our loan officer conveyed that not only could they not consider his bonus income but that our preapproval had further dwindled to $250,000, with interest rates rising to 4.5%. We were beyond frustrated and felt completely defeated.
Exploring Other Options: Quicken Loans Rocket Mortgage
At this point, I began researching alternative lenders. While local lenders were an option, I recalled one of the smoothest transactions I had ever encountered as a Realtor when a buyer used Quicken Loans to purchase a home. The process was seamless, communication was outstanding, and the buyer was thrilled.
Though Realtors® typically recommend local lenders, Quicken Loans stood out as a viable option in my mind. I initiated a chat with Quicken and was soon contacted by a banker, Daniel. He exuded confidence in his ability to assist us. After explaining our situation, he assured us that using the bonus income wouldn’t be an issue, provided we could document it.
The Quicken Loans Preapproval Process
In a concise one-hour session, we secured a preapproval for an FHA loan, requiring a 3.5% down payment, at an impressive interest rate of 2.875%. Moreover, our preapproval amount soared to $320,000! A conventional loan would have necessitated at least a 5% down payment and carried a 3.5% interest rate.
We had some paperwork to complete, including questions about whether we had a mortgage in forbearance during the COVID-19 pandemic. Our home sat on the market for several months after listing it for sale in March 2020 in Illinois, a state under lockdown. Many potential buyers were hesitant to make a purchase based solely on virtual tours. To alleviate financial pressure, we placed the mortgage in forbearance for a time.
Daniel inquired whether we had sold the home while in forbearance, and the answer was affirmative. Importantly, we hadn’t missed a